Risk Management-Driven Policy Rate Gap

Giovanni Caggiano, Efrem Castelnuovo and Gabriela Nodari

No 225, "Marco Fanno" Working Papers from Dipartimento di Scienze Economiche "Marco Fanno"

Abstract: We employ real-time data available to the US monetary policy makers to estimate a Taylor rule augmented with a measure of financial uncertainty over the period 1969-2008. We find evidence in favor of a systematic response to financial uncertainty over and above that to expected inflation, output gap, and output growth. However, this evidence regards the Greenspan-Bernanke period only. Focusing on this period, the "risk-management" approach is found to be responsible for monetary policy easings for up to 75 basis points of the federal funds rate.

Keywords: Risk management-driven policy rate gap; uncertainty; monetary policy; Taylor rules; real-time data (search for similar items in EconPapers)
JEL-codes: C2 E4 E5 (search for similar items in EconPapers)
Pages: 15 pages
Date: 2018-07
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-rmg
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Citations: View citations in EconPapers (11)

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Related works:
Journal Article: Risk management-driven policy rate gap (2018)
Working Paper: Risk Management-Driven Policy Rate Gap (2018)
Working Paper: Risk management-driven policy rate gap (2018)
Working Paper: Risk Management-Driven Policy Rate Gap (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:pad:wpaper:0225

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